Gallagher Faces $1 Million Pay Cut If Confirmed for SEC Post

June 13 (Bloomberg) -- Daniel M. Gallagher will take a pay
cut of more than $1 million a year if the Senate confirms him
for a spot on the U.S. Securities and Exchange Commission.

The securities lawyer and former SEC deputy division
director is one of President Barack Obama’s two commission
nominees facing a confirmation hearing tomorrow before the
Senate Banking Committee. Gallagher’s financial disclosures show
he was paid about $1.2 million a year advising SEC-regulated
firms. If confirmed, his salary will be $155,500, according to
the U.S. Office of Personnel Management.

Lawmakers will consider Gallagher, 39, who is a partner at
Wilmer Cutler Pickering Hale & Dorr LLP, and incumbent
Commissioner Luis Aguilar, 57, a Democrat nominated for a second
term. Gallagher would replace fellow Republican Kathleen Casey,
whose five-year term expired last week. Casey is permitted to
keep serving on the five-member commission until replaced, as
Aguilar has done since his term ended more than a year ago.

Since leaving the SEC’s trading and markets division in
early 2010, Gallagher consulted for Bank of America Corp.,
Deutsche Bank AG and General Electric Co., the disclosures show.
He has also worked with accounting firm PricewaterhouseCoopers
LLP; NYSE Euronext; Goldman Sachs Group Inc. unit Spear Leeds &
Kellogg Specialists LLC; and private investment firms including
Citadel LLC, DE Shaw & Co. and Elliott Associates LP.

Almost all of the companies he advised are regulated by the
commission Gallagher may soon join. He declined to comment on
the details of his financial disclosures.

‘Stepping Stone’

Patrick McGurn, executive vice president at Rockville,
Maryland-based Institutional Shareholder Services, said there
has been an “evolution” in the SEC appointment process, with
nominees “closer to the beginning of their career than the end
of it,” rather than those capping careers with public service.
“I think it has raised the question about people using the
position as a stepping stone,” McGurn said.

Gallagher would join Commissioner Troy Paredes, a
Republican who was 37 when confirmed in 2008, Commissioner
Elisse Walter, a Democrat, and Chairman Mary Schapiro, an
independent.

Aguilar has investments in 36 accounts and mutual funds,
according to his disclosures, with the highest individual
holding between $1 million and $5 million in a Vanguard Prime
Money Market Fund. The former securities lawyer also owns stakes
in International Business Machines Corp., Johnson & Johnson,
Coca-Cola Co., Merck & Co. and Procter & Gamble Co., the
documents show.

Aguilar, who declined to comment before the hearing, enters
the confirmation process with at least one ally on the Senate
panel, Robert Menendez of New Jersey.

Endorsement Letter

“His leadership has been key in corporate governance
reforms and in reinvigorating SEC enforcement,” Menendez, a
Democrat, said of Aguilar in a September endorsement letter to
the president. It also praised Aguilar’s support for a fiduciary
standard for brokers.

The Banking Committee also is set to consider the
nominations of Anthony Frank D’Agostino and Gregory Karawan to
be directors of the Securities Investor Protection Corp.

The confirmation process has drawn criticism this year from
those frustrated with procedural roadblocks, including Treasury
Secretary Timothy F. Geithner. He said at last week’s
International Monetary Conference that political abuses of the
confirmation process are “undermining the core elements of
reform,” with Dodd-Frank Act opponents blocking appointments of
financial regulators.

The day of Geithner’s June 6 speech, Nobel laureate Peter
Diamond withdrew as Obama’s nominee to the Federal Reserve’s
board of governors, citing Republican opposition over 14 months.